Interview on entrepreneurship

Quite some time back (when my blog used to be anonymous) I'd done an interview with the folks over at Voice of Ambition (VOA). Now that the blog isn't anonymous, I thought it would be a good idea to link to that interview in case anyone wants to hear it. Here are the details:

"K. K. Mookhey founder of NII consulting tells us how he quit his engineering and started his own company. He answers questions like where did he get his capital from? What was his business plan? How much was his initial capital? How he registered his company? How much it costs to register a company? What sectors provide an opportunity for new entrepreneurs? Who is their first client? Who is their biggest client? Is he willing to provide advice for new entrepreneurs? And much more."

Direct link to the episode is
http://www.voiceofambition.com/voa/component/option,com_remository/func,fileinfo/id,28/

(Almost) all your income tax queries answered

I just chanced upon an excellent blog that has answers to quite a few interesting income tax queries. I don't like the layout of the site, but the content is quite good. Check out Tax Worry.

Insights of the day - building a core management team

I happened to attend another excellent TiE session on building a core management team. It was headed by Parag Paranjpe, Director, HR at ICICI Venture. Some of the key takeaways from the session based on inputs from Parag, and the other attendees were:

• Talent looks out for opportunities for that talent to be harnessed. So your key USP has to be what opportunities do you provide for exploiting potential.
• Star employees look for autonomy and freedom - an equal stake in the organization. They want to make the organization bigger and share in the wealth that they help to create.
• Every leader must aim to make himself/herself obsolete in order for the people working under that leader to reach their full potential. The leader must then redefine his role and responsibilities and work to achieve a different set of goals.
• One of the most important attributes to look out for in a candidate is personal integrity. And the best way to determine this is to check for references and learn to read between the lines when the references respond to your queries. Parag gave an example of ICICI Venture contracting an international firm to do a background check on a candidate they were hiring for their Zurich office. And they looked at the huge fees paid to this firm as an investment that would pay off. But he said, that was only reducing the risk, we still would never know for 100% sure if all that we were told by the candidate is correct or not.
• Also, while hiring try to determine whether the employee is joining you for money or for a higher purpose. Does the candidate seem to buy into your vision or is simply making the jump for a better pay package?
• The past history of a candidate is the best indicator of future behavior. Dwell into it, and ask deeper questions based on the candidates previous profile. Everyone promises great things in the future, but have they delivered in the past?
• Try to determine as accurately as possible the real reasons why the candidate is leaving his previous company and joining your company.
• Another important aspect is the cultural fit. How well do you think the candidate would fit into your existing corporate culture. If your existing culture is open and autonomous, does he or she have the ability to work and excel in such an environment or is he/she a very hands-on micro-managing type leader?
• Other ideas were to ask candidates to write down their answers on questions such as achievements, failures, goals, and dreams, rather than ask them to answer verbally.

Insights for the day - V. S. S. Mani from JustDial

I just came back from attending a very insightful personal session with V. S. S. Mani the founder of Just Dial, which was organized by TIE.

JustDial was started somewhere in 1995 after a lot of false starts by Mani, who was earlier director at Ask Me services. Started with a capital of Rs. 50,000 it is now a Rs. 100 crore company with a valuation of over Rs. 500 crore. From days when they were selling wedding planners to generate revenue to today where PE's and venture capitalists are being rejected because they simply don't want any more funding. Here were some key takeaways:

1. When the whole world and its aunt was harping on about the dotcom boom, Mani decided to continue his information services business through the telephone model, and not chuck it all away for an online model. He profited at that stage by selling part of his stake to a US investor, but didn't spend truckloads of cash on building a dotcom and promoting it. He says the Internet infrastructure was so pathetic in 2000-2001, that there was no way that a dotcom business would possibly work well.
2. The key to a successful business is scalability. If you can tell a story to your employees, your partners, and your investors about how you're going to be scaling up the company, how you're going to grow and expand, then you've got a winner on your hands. If your business doesn't scale, do it differently, or do something different.
3. If possible do a short course on financial accounting, and learn the basics about accounting, balance sheets, profit and loss, and cashflow. That is essential, because if you take financially bad decisions your business will crumble. It is like a baby that needs proper care and nurturing.
4. He doesn't stick to any office hours, but does not believe in delegate and forget. He is not operational, but when he delegates, he follows up - every day! He says, in India, your managers and employees will start nodding their heads about how they've understood what needs to be done, but won't do it, or won't do it right, until you follow up and oversee them.
5. When you are growing your business, don't be pretentious. Don't try and show off that you're doing great. Investors don't necessarily want to see great infrastructure, they want to see the virtual reality world you are going to build and that you are asking them to invest in that world. Not the world you live in today. He started off with a small cubicle in Nariman Point, before moving to a 300 sq. ft. shop in the suburbs, and then adding two more shops of 300 sq. ft. each. And that was his situation even in 2000 when the US investor decided to pump cash into his business.
6. When asked about the importance of branding, he said the most important branding is excellent executions. Happy customers will build your brand much better and much bigger than anyone amount of advertising or PR will. Word of mouth is the best publicity you'll ever generate.

Married to your idea?

I just had an epiphany of sorts a few days back.

I was attending a TIE forum meeting, when Manak Singh, the convener of the forum and I began exchanging notes on business in general. And he told me that at an earlier TIE conference, they had invited Vivek Paul of Wipro. One of the key things Paul said was that the problem with a lot of Indian entrepreneurs is that they often get married to the idea with which they start their business.

They first decide that they are going to sell a particular service or product, and then go out to look for a market for that service or product. The way it should ideally work is an outside-in approach, where you first see what the market really demands and then try and deliver that, instead of an inside out approach.

The entire discussion started when Manak Singh asked me about scalability, and I said pure security consulting services does not seem to have the ability to scale - the market demand does not enable the kind of growth that I would ideally like.

I then took this discussion to our annual bootcamp, where once a year we all meet and present on various topics, and throw ideas around. When I presented the vision for the next 3 years, the teams started to question our ability to achieve the numbers based on pure consulting services, and then the suggestions started to pour in. We need to go beyond just pure advisory services, get into implementation, product reseller-ship, and maybe even into network and system integration.

I'll keep posting on how the expansion plans work out, but I got a good feel about this. Although, we might have been earlier leaving money on the table by not aggressively pursuing other projects, it won't be the case any longer!

So maybe a key question that an entrepreneur needs to ask is whether they are the only buyers of their idea. And maybe even more importantly this is a question that entrepreneurs need to keep asking throughout the lifetime of their companies. I could quote a couple of very interesting examples here: Nokia started off as a wood-pulp unit, then was bought over by a rubber manufacturing company, and then merged with a company manufacturing telephone cables. This fusion company was manufacturing paper products, bicycle and car tires, footwear (including Wellington boots), personal computers, communications cables, televisions, electricity generation machinery, capacitors, aluminium, etc.

Another intriguing example is 3M, their most popular product being the Post-It notes. Very few people would know that the name 3M stands for Minnesota Mining and Manufacturing Company, which went through a financial crunch, got out of the mining business, and became what it is today because the people running the company did not feel that they had to remain "loyal" to the original idea! Read about its fascinating history here.

Funding your business using credit cards?

I just came across an article about using credit cards to fund your startup. Although, the article is for the US environment, I think this is a patently bad idea, especially in India. The current interest rates on credit card debt are close to 2% per month, which is 36% per year! If that is not usurious, I don't know what is. It might actually be cheaper to go and raise money from your neighborhood money-lender!

The rules in India allow the directors to pay for certain expenses of the company from their own resources, and to then get reimbursed a few months or maybe a year or so down the line when the company has started generating enough funds. Knowing that fewer than 5% of new ventures actually succeed, why take such a huge risk and be saddled with debt and surmounting interest costs?

In any case, rolling over credit card debt, or switching from one provider to another just because you're exceeding your credit limits on the first card, means that you're spiraling way down a debt trap. Doing this, when trying to get your business up and running is a horribly bad idea. So don't fall for the temptation of abusing your credit ratings you might have built up by religiously paying off your credit card bills while you were in a regular salaried job. Your income when running your business is going to be close to nil for the first year or so. It is far better that you work harder at building up the funds yourself or rallying family and friends around to the idea of supporting your business.